Author Charles Eisenstein has a modest proposal to keep rich people from hoarding all the cash and free up capital for the rest of us. Photo: “Occupy Wall Street — The Revolution is Love.”

Imagine if you had a warehouse full of bread that would go stale in three days. You’d want to get rid of it as quickly as possible. Of course, you wouldn’t try to sell it at premium prices. Instead, you’d want to hold a liquidation sale. Or, maybe even not go through the bother of trying to sell it at all — just give it away. In that way, you’d earn both gratitude and favors that you could call in later. In a sense, giving away all your bread would become an investment in social capital.

Or, consider the linguist who asked an indigenous hunter from Brazil’s Piraha tribe why, when he felled some big game, he threw a big feast, letting his guests eat up all the meat in one orgy of indulgence, instead of thriftily drying the meat to save it for the future? In response, the hunter laughed and replied, “I store meat in the belly of my brother.”

Nature and relationships

The last two centuries stand out from the rest of human history for the dominance of money as a medium of exchange. “Most of our ancestors didn’t use money very much, not for food, shelter, clothing, or entertainment. All these were done by people helping each other out in the family or extended family,” Eisenstein told me.

Ever since the Industrial Revolution, the marketplace has expanded from a sideshow into the world economy’s main event. ”The monetized realm has grown, converting nature into products and relationships into paid services until there’s almost nothing left to convert anymore,” Eisenstein told me.

We can’t cut down more forests or increase the fish catch. What’s less recognized is that the social space to convert relationships into services has almost reached its peak too. We pay for almost everything, even the most intimate things, like cooking meals. People hardly sing anymore — we pay for our entertainment. There’s almost no community left, community being a group of people who share gifts. You look at your neighbor driving out of his garage in his car and you might say hi, but behind that there’s a view that you don’t need each other.

Aside from the anomie and alienation this creates for people, the problem is that peak nature and peak relationships are together slowing growth and starving the economy.

Our economy cannot function without growth because most money is not printed by governments, as people usually imagine, but is instead loaned into existence by central banks and commercial lenders, who can loan out ten dollars or more for every dollar they’re required to have in their vaults. In effect, then, a lender creates new money with every loan.

And the whole point of making loans is to earn interest for the lender.

But for the borrower, interest obliges her to pay back more than she borrowed. And to earn the money to pay back the principal plus accumulated interest, the borrower will need to create goods and services. Multiply that out across the whole economy, and it becomes an imperative for economic growth.

“Without growth, debt increases faster than income and wealth and the whole system crashes. Before that, you get polarization of wealth income and unemployment,” Eisenstein said, aptly describing today’s plutocratic rule by the top 1%.

So, since all national currencies, whether the dollar or the Euro or the Yuan, allow lenders to earn interest, the whole economy becomes addicted to economic growth. As long as we continue to let banks create our money through their loans, we’ll all have to keep creating more goods and services, thus despoiling the Earth and exploiting each other just to stay above water.

Like inflation, only better?

A century ago, ordinary Americans weren’t afraid of inflation. Instead, they supported William Jennings Bryan who demanded “soft” money that would decrease in value and relieve debtors.

Financial elites have done well indoctrinating the ordinary citizen about the dangers of inflation, with stories of the horrors of double-digit price increases under Ford and Carter or hyperinflation in 1920s Germany or 2000s Zimbabwe.

Today, it’s hard to imagine that many ordinary Americans in the late nineteenth century, especially farmers, actually clamored for more inflation as a way to reduce the burden of their debts. That’s why their champion, populist William Jennings Bryan, famously denounced inflation-resistant hard currency as a “Cross of Gold.”

Like a modern-day Bryan, Eisenstein wants money to decline in value. But for him, it’s as much about saving the Earth from predatory economic growth as it is about saving the farm from the bank.

“The problem with money is this growth imperative that converts everything into itself. And we’re reaching the peak of that,” Eisenstein explained. “It’s not about ‘sustainable growth,’ which is an oxymoron. And it’s not about finding some way to keep the growth system working. It’s about reclaiming life from money. It doesn’t mean eliminating all money but instead taking back certain realms, the natural and social commons, away from money.”

And to do that, Eisenstein proposes a new-and-improved kind of money: negative-interest currency. Essentially, it would be money that spoils.

With today’s money, you can hoard it in a CD and just sit back and watch the interest compound. That encourages rich people to hoard money. But with negative-interest currency, any saved money would depreciate at a fixed rate, perhaps 2% annually, unless it were lent out (at no interest) to start new businesses or pay for something else useful. Built-in depreciation would discourage hoarding by creating a hot-potato effect, where people want to get money out of their hands as soon as possible before it starts to lose value. As Eisenstein explained to me:

Negative interest is a different kind of money system. For example, it could involve a liquidity tax or charge on reserves in the Fed or central bank system. If banks hold onto their money as they do today, their money would slowly shrink in value. So would your checking account. So it gives you an incentive to lend your money, even at zero interest. Thus, you can have money circulate without an imperative for growth…It amounts to a slow-motion debt forgiveness, kind of like inflation in that it works to the benefit of debtors and against the interest of creditors. For those of us living paycheck-to-paycheck, it would have little effect except to help us to pay back debts more easily.

But if you want money that goes down in value, doesn’t inflation already do that?

With today’s real inflation rate closer to 8% rather than the official 2% or 3% claimed by the Consumer Price Index on the one hand, and loan interest rates near zero on the other, it might seem like the US dollar has already become a negative-interest currency.

The difference between inflation and demurrage is complex, but the best simple explanation I could find was from the fine folks at Wikipedia: “Both inflation and demurrage reduce the purchasing power of money held over time, but demurrage does so through fixed, regular fees while inflation does so through expansion of the money supply through the actions of a central monetary authority distributing the new issue of currency.”

In other words, the US dollar inflates unpredictably under the influence of the Fed and the big banks acting in their own interests, while a local currency with demurrage is under local control and managed predictably to boost the local economy.

Neither a shitty deal nor a New Deal

By intentionally putting the brakes on economic growth, negative-interest money might discourage the kind of Wall Street speculation that crashed the economy in 2008, which was summed up so aptly by Senator Carl Levin (D-MI) quoting an internal Goldman Sachs memo that frankly assessed one particular bad investment the firm was pushing on its clients: “A shitty deal.”

Wörgel, Austria scrip with demurrage stamps. Though the town’s local currency successfully discouraged hoarding, the Austrian Central Bank scotched the scheme in 1933. (Click to enlarge.)

After the last big banking collapse, during the Depression, a so-called demurrage currency was actually tried in the debt-ridden town of Wörgl, Austria from 1932-33 to create what Eisenstein called an “economic miracle” that other areas sought to emulate.

These included dozens of towns in the United States that had already printed emergency local scrip to keep their economies moving during forced bank holidays. According to Eisenstein, some communities were preparing to follow a plan for local no-interest currencies from economist Irving Fisher. But as part of the New Deal compromise with the big banks who feared that Fisher’s plan would take power out of the hands of Wall Street, in 1933 President Roosevelt outlawed all local currencies and instead offered a massive, centralized program of public works.

As in the 1930s, today rich people and corporations are hoarding massive amounts of savings — more than $3 trillion – waiting for an opportunity to earn higher returns in the future. At the same time, small businesses and working families remain starved for capital. To break this logjam, Eisenstein thinks that now is the right time for localities to start printing their own interest-free money with depreciation built right in.

The powers-that-be continue to tell us that recovery is just around the corner. But fewer and fewer Americans are comforted by these hollow assurances, which for Eisenstein, represents a failure of the magic power of the elites over the people.

“The Fed cutting rates doesn’t seem to work anymore. When magic stops working it means the substructure of agreements, the deep myths underlying the interpretation of symbols are wearing thin.”

Walking away from Rome

Oklahoma City’s “non-interest bearing” scrip was one of dozens of local emergency currencies printed across the U.S. in the face of 1930s bank closures.

If enough localities opted out of the dollar zone by starting their own local currencies, then pretty soon Wall Street and Washington could just be talking to each other with nobody else listening. The rest of us would be too busy trying to keep our money circulating in our own towns.

But there is a sticking point. If a negative-interest currency encourages us to spend rather than save, how can we be sure consumers will spend their money only on things that are good for people and the planet? What’s to keep people from continuing to buy SUVs or Walmart clothes from sweatshops in China?

There’s another rub. If bankers and the president shut down local currencies in the thirties, why will today’s banksters and their captured president be any more willing to let American communities print demurrage money that would allow them to defect from the growth economy?

“The elites can barely hold it together right now. Stuff they would’ve happily squashed a generation or two ago is now just passing beneath their notice, partially from the dynamic of complex systems, which, as they get more complex also get harder to maintain,” Eisenstein told me.

Each investment in additional complexity gives you diminishing returns and eventually zero returns and then things fall apart. The elites can’t be bothered to squash everything. Also, the shift towards an ecological consciousness is happening everywhere, even among the elite…They’re having personal crises, they’re quitting their jobs, they’re defecting or else they’re just not really enthusiastic about doing what they’re supposed to do. And sometimes they’ll allow something they really shouldn’t allow if they want to maximize central control.